European equities rally despite concern over Germany

August 17, 2010

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By , LONDON, Aug 17 – Europe\’s leading stock markets pushed higher on Tuesday as investors digested news of falling German investor confidence and lower British inflation in the absence of any major company announcements.

The ZEW\’s monthly sentiment indicator, based on a survey of 284 analysts and institutional investors, fell 7.2 points to 14.0 points, below the indicator’s historical average of 27.3 points and a much sharper drop than feared.

"The decrease … indicates that the enormous growth observed in the second quarter is unlikely to continue," the ZEW institute said, with weakening conditions abroad likely to hit exports, Germany\’s main growth driver.

Last week, data showed that German gross domestic product (GDP) surged in the second quarter at its fastest rate since reunification 20 years ago, with output soaring 2.2 percent compared to the previous three-month period.

This followed figures showing that exports, the backbone of the German economy, rocketed 28.5 percent year-on-year in June to reach 86.5 billion euros (111.7 billion dollars), close to pre-crisis levels.

On Tuesday, official data showed that the prices of goods in Britain rose at a slightly slower pace in July compared with June on an annual basis, largely thanks to falling transport costs.

Consumer Price Index (CPI) 12-month inflation, the government\’s target measure, fell to 3.1 percent last month from 3.2 percent in June, the Office for National Statistics (ONS) said in a statement.

However, the level remained far above the Bank of England\’s 2.0-percent target rate owing to higher food costs.